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Psst - How much is your marketing budget? (first published in ILFM Magazine)

Lawyers often tell me that they are bombarded with marketing opportunities. They face a constant assault in the shape of sales calls from advertising agencies, search consultants, conference organisers and even charities; and it can be difficult to spot the snake oil from the genuine opportunities

Knowing which opportunities to investigate and which to ignore can be difficult if your firm does not have a detailed budget to accompany your marketing plan.

While there are surveys which purport to provide comparative information about levels of marketing expenditure among law firms, this should not be your starting point. Firstly, such surveys are often carried out for promotional purposes and so the questions, sample size and analysis may not be very robust or directly relevant to your firm.

According to the latest Financial Benchmarking Survey from the Law Management Section of the Law Society, the overall median marketing budget was 2.1%, with a quarter spending over 3% and a quarter just 1%.

In contrast, the latest figures that I could find from law firms in the US was 3.4% and a survey in 2015 by Macquarie Bank of 226 Australian firms highlighted how marketing budgets varied according to size of firm as follows:

However, as yet there is no standard or agreed means of calculating marketing expenditure across the legal profession. The Macquarie survey reports on ‘Marketing and business generation activities including advertising’ but there is no further clarification of what this includes. Where do membership fees and client entertainment sit? Are the wages of marketing staff included under ‘Marketing’ or under ‘Salary & Wages’? How do you compare two firms, where one employees a marketing manager on the payroll and the other employs a freelance marketing consultant? Is the cost of a new website marketing or technology? Is training in business development skills a marketing or HR cost?

There is certainly scope for better benchmarking of marketing expenditure among law firms. Any volunteers?

What do other businesses spend?

It is also worth taking a look outside of the legal profession to see how much importance other sectors place on their marketing budgets. A survey of Chief Marketing Officers by Deloitte Digital shows that only the energy sector operates with levels of marketing investment similar to the legal profession, lagging well behind potentially comparable sectors of Banking/Finance/Insurance at 8 per cent and Service Consulting at 12 per cent.

Investment or expense?

Many of these sectors see marketing costs as an investment, rather than an overhead. Certainly, in many retail businesses, digital marketing expenditure has replaced investment in property – clicks rather than bricks.

For example, pharmaceutical companies invest substantially in the research, development and launch of new drugs over many years in the knowledge that only a few will make it onto the market, and automotive companies invest huge sums in infrastructure before the first car rolls off the production line.

In contrast, professional partnerships usually want to see an immediate return on their marketing investment, and partners can be prepared to pull the plug before an initiative has had a chance to gain momentum.

I have sat in many meetings shortly after an event or an initiative was launched, to hear partners complain that they didn’t get any work out of it – when they have barely had a chance to follow up with new contacts, never mind build a relationship of trust and understanding.

I can vividly remember one partner comparing the cost of a certain marketing activity in terms of the equivalent expenditure on boys’ skiing weekends.

One of the reasons cited by many firms for converting to an ABS has been that it shifts focus away from driving returns in the short term, and allows firms to invest in longer term strategic developments. It will be interesting to see to what extent this is true in practice.

Budget setting

The most effective approach is to set a marketing budget based upon what you wish to achieve over the next few years. The budget will need to have at least two levels of expenditure:

Firm-wide marketing infrastructure – all law firms need a corporate identity and a website, and some may have firm-wide brand guidelines and a suite of materials which are used across the firm. Costs are generally spread widely, and should be relatively easy to forecast and budget for. If you are planning a major undertaking such as a new website or a rebrand, then you will need to plan well in advance. This budget can also provide for strategic developments, such as research into client satisfaction, mystery shopping, training and new software such as a CRM system.

Practice area and sector – if practice and sector groups are producing departmental business plans, then they should have a plan of marketing activities for the coming year and associated costs to back up their specific communications plans.

In addition, you may also allocate budgets for:

Location-based activities – in a firm with more than one office, you may have community activities which are local but spread across multiple practice areas.

Growth markets – if you are planning to expand into a new market, service, sector or geographic you will need to allow for a specific budget to cover launch materials and activities.

A calendar for receipt of budget proposals, review and approval should be clearly communicated within the firm.

Management teams need to keep sight of the big picture, as it is important that your processes for budget setting and authorisation of expenditure do not encourage a silo mentality, discouraging departments from working together in initiatives such as cross-selling.

Some flexibility needs to be maintained, but a good budget will provide a clear framework against which partners can evaluate any unexpectedly fabulous last minute offers that come their way.

Sue Bramall is the founder of Berners Marketing which works exclusively with independent law firms.